Post-Brexit 'wobble' sees house price growth hit lowest level for three years

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House price growth was at its weakest levels in three years in July - but there are signs of confidence returning after a "wobble" following the vote to leave the EU - surveyors have found.

A net balance of 5% of surveyors reported house prices rising rather than falling last month, according to the Royal Institution of Chartered Surveyors (Rics), marking the lowest reading in three years.

Sales continued to decline sharply in July. Across the UK, a net balance of 34% of surveyors reported a fall in house sales rather than an increase. This was broadly unchanged compared with June, when the decline in sales was the fastest seen since 2008. 

But Rics also said comments from some agents "suggest activity has picked up after an initial wobble, while others cite the Brexit vote as having only a modest or even negligible impact thus far".

Expectations for both house prices and sales in the year ahead rebounded in July, as surveyors upgraded their estimates compared with June.

The net balance of surveyors expecting house prices to head upwards rather than fall in the year ahead increased from a neutral level of zero to 23% in July.

While more surveyors are now expecting values to head upwards in the coming year, expectations are still softer than six months ago, when a balance of 66% of surveyors had anticipated rising prices.

Meanwhile, a balance of 13% of surveyors now expect to see sales increase in the coming year, turning positive after a negative reading of minus 12% in June.

Across the country, surveyors typically expect house prices to edge up by close to 3% a year for the next five years, while in London prices are expected to lift by around 4% annually over the same period.

Simon Rubinsohn, chief economist at Rics, said: "The rebound in the key 12 month indicators in the July survey suggest that confidence remains more resilient than might have been anticipated."

London continues to be the area with the most negative reading for current house prices, with a balance of 33% of surveyors there reporting prices falling rather than rising.

Despite the more positive long-term expectations for house prices, near-term predictions across the country remained downbeat for the third month in a row, with a balance of 12% of surveyors predicting a decline in house prices over the next three months.

Demand for homes from prospective buyers also fell for the fourth month in a row, with a balance of 27% of surveyors seeing a drop-off in July.

The report quoted the views of surveyors, with one saying there had been a "seasonal summer slowdown rather than Brexit panic".

Another said that while there had been fewer homes coming on the market since the EU referendum "existing arranged sales and agreed prices are holding firm".

Rics said the "acute shortage of property for sale", with the supply of homes on the market close to record lows in most parts of the UK, appears to be helping underpin house prices.

Last week's cut in the Bank of England base rate to 0.25% could also help to encourage more buyers into the market.

But Rics warned the lack of choice for home buyers "may weigh further on activity going forward".

Rics said a stamp duty hike for buy-to-let investors which was imposed on April 1 had also contributed to the more downbeat current state of the market, according to agents' views.